Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold to luxury auto manufacturers around the world. Because this is a quality product, Williams has some flexibility in pricing the part. The firm calculates the price using a variety of pricing methods and then chooses the final price based on that information and other strategic information. A summary of the key cost information follows. Williams expects to manufacture and sell 54,000 parts in the coming year. While the demand for Williamss part has been growing in the past 2 years, management is not only aware of the cyclical nature of the automobile industry, but also concerned about market share and profits during the industrys current downturn.

	Total Costs
Variable manufacturing	$	4,672,000
Variable selling and administrative		847,650
Facility-level fixed overhead		2,337,875
Fixed selling and administrative		667,495
Batch-level fixed overhead		352,000
Total investment in product line		22,342,000
Expected sales (units)		54,000

3. Determine the price for the part using a desired gross margin percentage to sales of 43%.

4. Determine the price for the part using a desired life-cycle cost margin percentage to sales of 20%.

5. Determine the price for the part using a desired before-tax return on investment of 12%.

6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5.

Method	Contribution Margin	Operating Profit
Markup on full manufacturing cost	$4,664,000selected answer incorrect	4,664,000selected answer incorrect
Markup on life cycle costs	$7,361,875selected answer incorrect	7,361,875selected answer incorrect
Price to achieve desired GM %	$4selected answer incorrect	not attempted
Price to achieve desired LCC %	not attempted	not attempted
Price to achieve desired ROA of 12%	not attempted